Date of Award
Spring 6-13-2026
Document Type
Undergraduate Honors Thesis
Degree Name
B.S. in Business Administration, Finance
Organizational Unit
Daniels College of Business, Reiman School of Finance
First Advisor
Doina Chichernea
Second Advisor
Conrad Ciccotello
Copyright Statement / License for Reuse
All Rights Reserved.
Keywords
Beta, Mean reversion, Systematic risk, Persistence, Market-model beta, Firm characteristics, Large-cap equities
Abstract
This thesis examines whether firm-specific characteristics help explain cross-sectional variation in the speed of beta mean reversion among large-cap U.S. equities. Using WRDS market-model betas based on trailing weekly returns, the study constructs non-overlapping annual June beta observations for a stable sample of 190 firms that remained continuous constituents of the S&P 500 from 2000 through 2024. The analysis proceeds in three stages. First, pooled and fixed-effects panel regressions test whether beta mean reversion exists in the sample overall. Second, a firm-specific persistence parameter, gamma, is estimated from rolling ten-year windows of annual betas in order to measure differences in the speed of reversion across firms and over time. Third, these rolling gamma estimates are matched to annual firm characteristics and industry classifications to explore possible determinants of beta persistence. The results show clear evidence that beta mean reversion remains present in a modern large-cap setting: high betas tend to decline and low betas tend to rise toward a central value over time. The results also show meaningful heterogeneity in reversion speed across firms, years, and industries. Finally, the determinant analysis provides partial support for the view that observable firm characteristics explain some of that variation. Industry classification, leverage, and, in some specifications profitability, show explanatory value, while overall model fit remains modest. As a result, the study suggests that beta mean reversion is both measurable and heterogeneous, but only partially explained by conventional firm characteristics, making the determinant analysis best understood as an exploratory pilot study.
Copyright Date
4-17-2026
Publication Statement
Copyright is held by the author. User is responsible for all copyright compliance.
Rights Holder
Dimitry Afanasenko
Provenance
Received from Author
File Format
application/pdf
Language
English (eng)
Extent
35 pgs
File Size
958 KB
Recommended Citation
Afanasenko, Dimitry, "The Dynamics of Beta Mean Reversion" (2026). Finance: Undergraduate Distinction Theses. 1.
https://digitalcommons.du.edu/finance_udtheses/1
DOI
https://doi.org/10.56902/ETDCRP.2026.128